30 November 2020
Some bitcoin investors predict the virtual currency could rise to as high as $100,000 in a year. That is around five times its current value.
The predictions have drawn criticism from those who believe bitcoin is a speculative asset – something a person or company owns that involves too much financial risk.
Predictions and popularity
Since January, bitcoin has increased by 160 percent. It is getting close to its all-time height of just under $20,000 in December 2017. It was last trading at $18,415.
Brian Estes is chief investment officer at Off the Chain Capital. It is a hedge fund - a group of investors who take financial risks together in order to try to earn a lot of money.
Going from $18,000 to $100,000 in one year is not impossible, Estes noted. "I have seen bitcoin go up 10X, 20X, 30X in a year. So going up 5X is not a big deal."
Estes predicts bitcoin could hit between $100,000 and $288,000 by the end of 2021.
Tom Fitzpatrick, an expert at international banking group Citi, said in a note last week that bitcoin could climb as high as $318,000 by the end of next year. Fitzpatrick said the rise could come because of the currency's limited supply, ease of movement across borders, and unclear ownership.
However, those numbers do not make sense to Toronto-based Kevin Muir, an independent trader. He says he does not expect such huge gains for bitcoin.
"Is it plausible?" Muir said. "For sure. It's a mania." Mania is an extreme excitement or desire for something that is usually shared by many people.
But Muir added that no one really has a clear idea about how high bitcoin will go.
Bitcoin relies on so-called "mining" computers that approve or confirm groups of transactions. The computers compete to solve mathematical puzzles every 10 minutes. The first to solve the puzzle and clear the transaction is rewarded new bitcoins.
Bitcoin's technology was designed to cut the reward for miners in half every four years. The idea behind the move was to reduce inflation. In May, bitcoin went through a third "halving," which reduced the rate at which new coins are created. This, in turn, reduced supply. That halving started bitcoin's renewed growth.
In a recent letter to investors, hedge fund Pantera Capital said Square's Cash App and PayPal have been buying all new bitcoins. Those buys have caused a bitcoin shortage.
Cash App and Paypal recently launched a cryptocurrency service to its more than 300 million users.
The so-called whale index measures accounts holding at least 1,000 bitcoins. This index is at an all-time high, said Phil Bonello, research director at digital asset manager Grayscale.
Lennard Neo is head of research at Stack Funds. He says with the entry of Square and PayPal, he expects a stronger increase in demand than in 2017. Neo predicts bitcoin will reach $60,000 to $80,000 by the end of 2021.
Tempus Inc currency trader Juan Perez does not understand, and is even shocked, by all the big predictions. Perez said an estimate that bitcoin will reach $100,000 next year would be a prediction about the collapse of the worldwide financial system.
"Governments around the world won't let that happen," he said.
I'm John Russell.
Gertrude Chavez-Dreyfuss reported on this story for Reuters. John Russell adapted it for Learning English. Bryan Lynn was the editor.
Words in This Story
virtual – adj. existing or occurring on computers or on the Internet
plausible – adj. possibly true : believable or realistic
transaction – n. a business deal : an occurrence in which goods, services, or money are passed from one person, account, etc., to another
puzzle – n. a question or problem that requires thought, skill, or cleverness to be answered or solved
reward – n. money or another kind of payment that is given or received for something that has been done or that is offered for something that might be done
cryptocurrency – n. a kind of virtual currency or money
digital – adj. relating to computer technology, especially the internet
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